CONTROLS OVER REFUNDS TO CERTAIN INDIVIDUAL
TAXPAYERS COULD BE IMPROVED

Issued on September 29, 2011

Highlights

Highlights of Reference Number: 2011-40-126 to the Internal Revenue Service Commissioners
forthe Large Business and International Division and the
Wage and Investment Division.

IMPACT ON TAXPAYERS

In Calendar Year 2009, the
Internal Revenue Service (IRS) issued approximately 74,000 refunds
totaling more than $472 million to taxpayers filing Tax Year 2008 U.S.
Individual Income Tax Returns (Form 1040, 1040A, and 1040EZ) with **********2(f)*****************It is imperative that controls are in place
to ensure these refunds are accurate to prevent duplicate refunds and
fraudulent claims.

WHY TIGTA DID THE AUDIT

This audit was initiated to
determine whether controls over *******2(f)*****were
effective in minimizing the risk of issuing erroneous refunds.

Thorough
examination of returns *******2(f)************ claiming
*****2(f)***credits is essential to ensure accuracy and to identify or prevent
duplicate and fraudulent refunds.

WHAT TIGTA FOUND

TIGTA found no major overall trends indicating
significant volumes of questionable refunds being issued to individual income
taxpayers *****2(f)******************** However, TIGTA found a disproportionate number
of returns filed ********2(F)*******making certain claims.The IRS had identified a refund scheme
involving returns filed by taxpayers ***************2(f)***************making
these claims.However, manual controls
to freeze subsequent refunds of taxpayers involved in this scheme were
ineffective.TIGTA notified the IRS of
this finding and it took immediate actions to address the issue.TIGTA provided the IRS with databases of
potentially questionable refund returns filed by individuals *****2(f)** *****2(f)********making certain claims.

TIGTA
also found control weaknesses regarding ***2(f)*********************In addition, fraud awareness training was not
provided to campus employees as part of their annual ******2(f)****return
processing training.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the Commissioner,
Large Business and International Division, further refine the databases of
returns with potentially questionable refunds issued to *******2(f)*******by
applying specific filters to ensure returns with the highest risk are
identified and considered for further examination.TIGTA also recommended that the Commissioner,
Wage and Investment Division, ensure employees receive fraud awareness training
in their annual ******2(f)****tax return processing
training.

In their response to the report, IRS officials
agreed with the recommendations and plan to take appropriate corrective
actions.

READ THE
FULL REPORT

To view the report,
including the scope, methodology, and full IRS response, go
to: